Visitors use the EDD phone bank in Sacramento in 2013. This year the EDD hired more staff to help reduce delayed payments and cut robotically disconnected calls to 5% in mid-March from 90% at the end of 2013.

Visitors use the EDD phone bank in Sacramento in 2013. This year the EDD hired more staff to help reduce delayed payments and cut robotically disconnected calls to 5% in mid-March from 90% at the end of 2013. (Rich Pedroncelli, AP)

SACRAMENTO — State employees who process unemployment claims wrongly denied benefits for hundreds of thousands of jobless Californians, a result of a botched system and procedures that caused fired workers to wait months for benefits, a state audit concluded.

When over half of unemployment insurance claimants who appeal their EDD decision win their cases, there is clearly a breakdown in the system- Henry T. Perea (D-Fresno), Assembly Insurance Committee Chairman

The state Employment Development Department's poor handling of requests for jobless benefits forced the laid-off workers to appeal the agency's rejections of up to $450 a week, sorely needed money to pay rent, grocery and gas bills, State Auditor Elaine M. Howle said in a report released Thursday.

The unemployed workers won their appeals 45% to 51% of the time during a nearly four-year period from July 2010 to April 2014, Howle noted.

The audit's major findings: EDD workers did not adequately determine whether alleged false statements by jobless workers were willful, did not always contact them and their employers to gather necessary information, and conducted insufficient fact-finding before denying unemployment benefits.

Howle recommended that the agency “change its practices and update its training” and encourage staff members to attend appeals board hearings, when cost-effective, to better explain decisions denying claims.

The audit, which the Legislature put on a unusually fast track, was approved in March at the request of Assembly Insurance Committee Chairman Henry T. Perea (D-Fresno), following reports in the Los Angeles Times about problems at the EDD.

The Central Valley lawmaker had been alarmed by preliminary data that showed a high rate of reversals in appeals of rejected claims. He and other legislators were bombarded with calls and complaints from the public about EDD computer and phone systems that kept them from getting their benefits.

“When over half of unemployment insurance claimants who appeal their EDD decision win their cases, there is clearly a breakdown in the system,” Perea had said in asking the Joint Legislative Audit Committee to probe the agency's claims-handling processes.

The new audit, he said, “confirms many of the issues raised during hearings my committee held.”

The Times reports, which prompted state lawmakers to seek the audit, found that judges overturned 163,375 appeals out of 296,030 — or 55% — from July 2012 to October 2013. The reversal rate rose to about 70% in cases in which the EDD said claimants did not comply with department rules.

According to the audit, the EDD generally agreed with the auditor. But Director Patrick W. Henning Jr. disagreed that the agency did not always follow key judicial decisions and often failed to gather necessary information before denying benefits.

Nevertheless, Henning said in a letter to Howle that he would “reemphasize to staff the importance of ensuring that facts leading to the decision [on any claim] are fully documented.”

The EDD stressed that it has improved its performance. This year, it upgraded computer software and hired more staff to help reduce delayed payments and dramatically cut robotically disconnected calls to 5% in mid-March from 90% at the end of last year.

“We are committed to conducting efficient and quality interviews,” Henning said, “and reducing the number of overturned appeals and the delays those can create for our customers.”

Advocates for the jobless and working poor praised the audit for addressing long-standing concerns. At the same time, they credited the EDD for improving its customer service.

“The EDD has some serious legwork to do to improve the fairness and accuracy of the claims determination process,” said Maurice Emsellem of the National Employment Law Project. “It's time to work on the underlying reliability of the initial determinations.”

Out of 58 counties in California, 13 had unemployment rates above 10% in May, down significantly from the 24 that exceeded the gauge the prior month, according to the state Employment Development Department.

The consumer price index, a leading measure of inflation, fell last month into negative territory over a 12-month period for the first time since the fall of 2009, when the nation was just emerging from recession. It also fell from December, the third straight month-to-month decline.

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